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Working Paper

Appointing the Median Voter of a Policy Board

Partisan politics and elector uncertainty generate policy uncertainty and partisan business cycles. To reduce policy uncertainty, society must design the policy-making environment to overcome electoral uncertainty and partisanship without ignoring the electorate’s wishes. I show that delegating policy to an independent policy board with discretionary powers substantially reduces policy uncertainty while maintaining political accountability. Board members are chosen in a partisan, noncooperative environment yet, in the benchmark model, policy uncertainty is eliminated and the policy rule is replicated. Thus, a political “invisible hand” is at work—by setting up the policy institution properly and having the participants pursue their own self-interest, the social “optimum” prevails.

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Waller, Christopher. 1998. “Appointing the Median Voter of a Policy Board.” Federal Reserve Bank of Cleveland, Working Paper No. 98-02.